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Statement of Ambassador Johnnie Carson
Assistant Secretary of State Bureau of African Affairs
Senate Foreign Relations Committee
June 28, 2012
"Economic Statecraft: Embracing Africa’s Market Potential"
Mr. Chairman and Members of the Committee:
Thank you for providing me with the opportunity to address the committee
on what I feel is an important and timely topic. The U.S. government is committed
to expanding trade and investment in sub-Saharan Africa and the numbers show
our commitment. U.S. trade to and from Africa has grown significantly in the past
ten years. U.S. exports to sub-Saharan Africa tripled from just under $7 billion
U.S. dollars in 2001 to over $21 billion dollars in 2011.
As Secretary of State Clinton said at the annual AGOA Forum two weeks
ago: “twelve years ago, the United States passed the Africa Growth and
Opportunity act because we believed that the countries of Africa had tremendous
untapped economic potential that could and should be developed. We shared a
vision with many of you of a future in which economic growth in Africa would
fuel growth and prosperity worldwide…trade and investment would multiply…and
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people across the continent would have new opportunities to start their own
businesses, earn higher salaries, improve their lives, and lift the fortunes of their
families and communities.”
In large part, this vision is becoming reality. It is my firm belief that Africa
represents the next global economic frontier. Sub-Saharan Africa continues to
weather the global economic crisis more successfully than other regions, and is
home to six – and soon to be seven – of the ten fastest growing economies in the
world. A recent McKinsey study documented that Africa offers the highest rate of
return on foreign investment of any developing region and has for some years now.
Consumer spending continues to rise, and 43 percent of Africans currently have
discretionary income or could be considered middle class consumers. And a
growing middle class is a market for American products – from ipads to Pampers
to Caterpillar tractors which increase crop yields to GE turbines which create
additional hours of on-grid electricity to Boeing airliners which facilitate African
countries’ growing links with each other and with other continents.
However, we can do more. Africa's recent economic growth is impressive
but the region still only accounts for approximately two percent of global trade.
The second pillar of President Obama’s recently announced U.S. Strategy Toward
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Sub-Saharan Africa directs the Administration to “spur economic growth, trade
and investment in sub-Saharan Africa.” This new approach recognizes that it is in
the interest of both the United States and our African partners to improve the
region’s trade competitiveness, encourage the diversification of exports beyond
natural resources, and ensure sustained economic growth which benefits all sectors
of society.
This new strategy elevates economic growth, trade and investment issues by
calling for increased U.S. focus to (1) promote an enabling environment for trade
and investment ; (2) improve economic governance; (3) promote regional
integration; (4) expand African capacity to effectively access and benefit from
global markets; and (5) encourage U.S. companies to trade with and invest in
Africa.
In addition to the President’s new U.S. Strategy Toward Sub-Saharan
Africa, our efforts to increase our commercial engagement in Africa are firmly in
line with Secretary Clinton's global focus on Economic Statecraft. The State
Department's economic statecraft policy harnesses the forces of global economics
to advance our diplomatic agenda and puts the tools of our diplomacy to work to
meet our economic goals. We are committed to using every opportunity available
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to advance not only diplomatic and political priorities but our economic and
commercial goals as well. I would like to highlight a few of the programs that the
Bureau of African Affairs has been working on as we shift our economic
orientation towards Africa from focusing almost exclusively on development
assistance to promoting sustained economic growth through private sector,
commercial, trade and investment activities.
The African Growth and Opportunity Act continues to be the centerpiece of
our trade policy with sub-Saharan Africa. It is Africa’s most important vehicle for
market access and its unilateral trade preferences have created enormous goodwill
for the United States on the continent. As you know, many African countries are
not taking full advantage of the benefits of AGOA. However, some AGOA
beneficiary countries take good advantage of the provisions for fabric and apparel
product lines. The third country fabric provision component of AGOA was
designed to provide an opportunity for AGOA-qualified countries to be more
competitive in labor intensive textile processes such as sewing, stitching and
cutting fabric.
It was widely recognized that most African countries were not able to
compete in the more capital intensive process of producing fabric from raw cotton.
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African manufacturers have successfully used the AGOA third country fabric
provision to create jobs, not just in the manufacturing countries but have used this
provision to create cross-border pan-African supply chains. These supply chains
also encourage regional integration – one of our key goals for the continent. Fabric
and apparel exports are the second largest AGOA export after extractive industry
products. However, these imports still account for less than two percent of U.S.
imports.
I’d like to say a few words about what is likely to happen if third country
fabric legislation is not renewed. In our globally linked world, American buyers
place orders six to nine to twelve months ahead. 95 percent of AGOA apparel and
textile exports enter under the third country provision. And the AGOA third
country fabric provision is the only way that African textile and apparel companies
can remain competitive with larger producers such as China, Vietnam and
Bangladesh.
Without our help, jobs will continue to disappear in some of Africa’s most
vulnerable economies, affecting primarily women and the families they support.
85 percent of these imports come from just four countries: Lesotho, Kenya,
Mauritius and Swaziland. I know that diplomats from these countries have come
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to see you to emphasize the disproportionate effect that lack of renewal of this
provision will have on their economies.
The effects of the loss of orders are troubling. At the AGOA Forum, the
Swazi Minister for Trade told AGOA delegates that the loss of the provision will
“shut the country down”. The textile and apparel sector is the largest formal sector
employer with over 15, 000 jobs and employment is already 41 percent in this
small, landlocked country. Loss of just one of these jobs means that ten people
lose their livelihood, since Swazi officials calculate that each textile job directly
supports ten people. Lack of orders have already led to plants closures in Namibia,
robbing people of their legitimate livelihoods and governments of much needed tax
revenues. The Mauritians report that their orders are down 30 percent since
January due to the uncertainty whether this provision will be renewed in a timely
fashion.
Madagascar’s loss of AGOA eligibility in 2009 is a possible model of what
could happen if this provision were to expire. Prior to its loss of AGOA eligibility,
Madagascar was one of the top textile producing countries in Africa, exporting
over $2050 million in textiles in 2007. Due to 2009 coup, the government of
Madagascar lost all AGOA benefits, including the textile provision. Apparel
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exports plummeted by $150 million in 2010. This more than $150 million drop in
textile exports resulted in the loss of 50,000 jobs which will more than likely never
return.
We continue to actively educate, inform and encourage U.S. companies to
be more active in Africa. This is a continent on the move and there are enormous
opportunities for U.S. companies to enter the market, make money, and create jobs
for Americans here at home.
In February, I led a trade mission to Mozambique, Tanzania, Nigeria and
Ghana with 10 U.S. energy companies ready to do business. A lack of reasonably
priced reliable power remains one of the most binding constraints to economic
growth throughout Africa. Governments across the continent are working to
attract new trade and foreign investment that will sustain their rapid economic
growth and build their middle class. The goal of this mission was to highlight
opportunities for U.S. companies and help address a glaring need for increased
power sector infrastructure in Africa. The mission was a success and a number of
these U.S. companies concluded partnership agreements with African companies to
jointly develop power projects. Ex-Im Bank and USTDA representatives also
participated in the mission to ensure that both the U.S. participants and our Africa
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partners are fully aware of U.S. financing options. We are in the process of putting
together a trade mission to accompany the Secretary to South Africa for the U.S.South Africa Strategic Dialogue. In addition, I plan to lead similar trade missions
in the future and continue to help and encourage U.S. companies to be a part of the
growing economic dynamism of Africa.
In our continuing efforts to inform, educate and encourage U.S. companies
to pursue commercial opportunities on the continent, just last week, the State
Department, in collaboration with the Department of Commerce’s U.S. Export
Assistance Center in Cincinnati, the Department of Transportion, the Ex-Im Bank,
USTDA, USAID USTR, and several other U.S. Government agencies, hosted a
U.S.-Africa Business Conference in Cincinnati, Ohio. This conference attracted
well over 400 participants, including African government officials, and
representatives from the U.S. and African private sectors and civil society. The
U.S.-Africa Business Conference expanded on the AGOA Forum infrastructure
theme by focusing on infrastructure development, including energy, transportation,
and water and sanitation. It showcased U.S. business expertise to potential African
clients and highlighted trade and investment opportunities in Africa to U.S.
exporters and investors through structured networking opportunities for African
government officials and business leaders with U.S. state and local government
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officials and business leaders; informational sessions on U.S. government
opportunities and services from various federal agencies; and site visits to
companies and research facilities highlighting potential technologies for Africa.
Cincinnati was selected as the conference location for its potential to
increase commercial partnerships with Africa at local, state, and regional levels
given its concentration of Fortune 500 and 1000 companies. I am pleased that the
Cincinnati conference built on the successes of the 2010 Kansas City, Missouri
business conference. Bringing African government officials and private sector
representatives outside of the beltway allows us to more effectively focus on
business to business linkages.
We also have two very popular programs which develop business capacity in
Africa, the African Women’s Entrepreneurship Program (AWEP) and the
President’s Young African Leaders Initiative. This year delegates from both
programs participated in both our AGOA Forum and US-Africa Business
Conference events. AWEP is an outreach, education and engagement initiative
that targets African women entrepreneurs to promote business growth, increase
trade both regionally and to the United States using AGOA, create better business
environments, and empower African women entrepreneurs to become voices of
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change in their communities. The State Department organizes an annual AWEP
professional exchange program for these women to improve their skills and has
created a series of public-private partnerships with ExxonMobil, Intel, Vital Voices
and the Cherie Blair Foundation for Women.
This year’s President’s Young African Leaders Initiative included the
Innovation Youth Summit and Mentoring Partnership with Young African Leaders
and brought more than 60 participants to the U.S. for three weeks of professional
exchange and entrepreneurial hands-on training. This initiative encourages U.S.Africa collaboration to promote business innovation, investment and corporate
social responsibility activities in Africa.
However, there are still many barriers that stand in the way of companies
that hope to do business there. In many places, corruption is too common. The cost
of finance, including investment finance, is too high. Infrastructure is lacking or
inadequate. Regulatory systems are often inconsistent and inefficient. Also, many
U.S. businesses see African markets as too risky. The perception of Africa as
poverty filled and strife ridden persists. We work closely with African
governments so that they will continue to enact the kinds of reforms to support
improved investment climates which will attract both domestic and foreign
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investment. In addition, we continue to highlight opportunities for trade and
investment in the region for U.S. companies and to work with them to conclude
deals. Our work with GE Transportation in Ghana on a locomotive tender where
GE was ultimately able to win a deal worth $200 million in U.S. content is but one
example. We are confident that the U.S. can compete effectively in Africa, but we
have to continue to encourage American companies to go to Africa and we have to
encourage African countries to continue to make their regulatory and business
environment more conducive for American business. Greater U.S.-Africa trade is
in the interest of both America and Africa.
Mr. Chairman and Members of the Committee, I want to thank you for the
opportunity to appear before you today. I will be happy to answer any questions
you have.
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